Banks and credit unions are grappling with mobile engagement issues. Deliver the right mobile banking experience, and consumers will love you. But without a rock solid mobile strategy, banks and credit unions are handing their competitors a big gift. Banking providers that don't get their mobile act together can't grow or retain relationships with today's digital consumers.

By Lisa Joyce, Senior Staff Writer for The Financial Brand

It may be hard to believe, but mobile banking — typically perceived as “impersonal” compared with face-to-face interactions in branches — actually drives deeper consumer engagement.

According to research from (a Fiserv company), mobile banking users are more likely than non-mobile bankers to use additional banking products. It’s also possible to look at the data the other way around: those who have adopted more banking products than others will also be the type of consumers more readily inclined to embrace digital services… or any other service, for that matter.

Whichever way you interpret the research clearly established that these mobile engaged consumers are more likely to recommend their financial institution to others than anyone else.

That’s why mobile banking is all about acquisition, retention and revenue — particularly when it comes to younger consumers. Millennial mobile bankers are significantly more engaged; this, in turn, increases their loyalty and makes them more profitable.

There’s a caveat, however. And it’s a big one.

Greg Ulankiewicz, Senior Research Analyst with Raddon and the report’s co-author says consumers who use mobile banking are a high flight risk if they don’t feel your mobile banking app is up to snuff.

The good news is that happy, satisfied mobile bankers are more likely than non-mobile bankers to recommend their bank or credit union. And the more frequently they use mobile banking, the more likely they are to recommend your institution to others.

Mobile Banking Users Are Multi-Channel Omnivores

Mobile bankers are more likely than others to use a variety of channels. It’s as if, says Ulankiewicz, consumers start using mobile banking, love the convenience and get hooked on the financial institution, then they look for more ways to interact with the institution, including visiting branches.

Yes, you heard that right: branches.

There’s a commonly held belief that people stop using branches — or even wanting them available — once they start using mobile banking. Executives in the banking industry like to think they can shutter branches by getting more consumers to adopt more digital channels. But it’s not true.

Mobile bankers tend to love branches more than non-mobile bankers. Mobile bankers visit branches more often than consumers who don’t use mobile banking, with 71% of mobile bankers saying that it is “extremely to very important” to have a branch and an ATM close to home or work, versus 58% of non-mobile banking consumers who want a branch and 46% who want an ATM nearby.

Mobile bankers are also more likely to access their bank or credit union account from a PC or laptop. Eight in ten mobile bankers use online banking versus only 63% of non-mobile banking users.

To Ulankiewicz, these findings demonstrate the engagement potential of a mobile banking strategy.

“Consumers who use mobile banking tend to use it frequently,” he explains. “That frequency promotes affinity with the institution and deepens the consumer’s relationship with the bank or credit union.”

Ulankiewicz says retail banking providers must strategically market and promote their full array of services across channels, and showcase how they provide a seamless consumer experience.

But in an apparent contradiction, these mobile consumers say they are inclined to remain loyal to their bank or credit union even if they can’t easily get to a physical branch. If they were to move to a location without a branch nearby for instance, the research shows they are more likely to stay with their institution compared to non-mobile bankers. Clearly mobile users’ comfort with digital banking makes them more willing to cut the physical umbilical cord, despite their claim that branches and ATMs are “very important.”

Don’t Forget About Tablets

Another common mistake leadership teams at banks and credit unions make is equating “mobile banking” with smartphones. But it turns out that practically no one uses mobile banking only on their smartphone; everyone who owns a tablet uses it for mobile banking some of the time, and nearly half use their tablet most- or all of the time.

Very frequent mobile bankers — the self-proclaimed “early adopters” — are significantly more likely to use their tablets for mobile banking than their smartphones. Raddon says the preference for a tablet over a smartphone suggests some end users may prefer/require the larger screen provided by the tablet to conduct mobile banking activities.

Not All Mobile Bankers are Created Equal

A lot of studies segment mobile banking users into traditional demographic buckets. In its research, Raddon used this type of segmentation as well. But Raddon’s researchers also categorized consumers by the frequency with which they accessed mobile banking services. Slicing the data this way yielded new layers of additional insights into consumers’ behaviors.

Raddon separated mobile bankers into four equal groups: occasional, moderate, frequent and very frequent users (each group comprised 25% of the total mobile banking population). The chart below shows how this segmentation correlates with income and age.

Consumer Segment

Occasional
Mobile
Banker

Moderate
Mobile
Banker

Frequent
Mobile
Banker

Very
Frequent
User

Fee Driven

31%

29%

25%

13%

Credit Driven

8%

11%

18%

38%

Middle Market

19%

19%

26%

24%

Low Income Depositor

19%

19%

7%

3%

Middle Income Depositor

11%

10%

8%

3%

Upscale

12%

13%

16%

18%

Generational Segment

Millennials

38%

35%

47%

69%

Gen X

26%

29%

27%

22%

Baby Boomer

31%

29%

24%

9%

Silent Generation

5%

7%

2%

1%

Tip: Use your own frequency segmentation model to analyze differences in your mobile banking users. Look at the tools and features used by the most frequent mobile banking consumers, and then educate the rest of your mobile banking population on those tools to drive increased engagement and frequency-of-use.

Very frequent mobile bankers tend to be the happiest and most satisfied of mobile banking users. But they are also the most willing to switch financial institutions if they believe that they can get a better mobile banking experience elsewhere. Fewer than one in five occasional mobile bankers say they would change banks or credit unions due to mobile banking, compared to 69% of very frequent mobile bankers who would consider changing.

Caution: Your most active mobile bankers can represent a greater risk of defection than those who use mobile banking less frequently. They are the ones who will have the highest expectations, and be the most picky. If they feel the experience is clunky, they will switch financial institutions.

Young, Non-Mobile Users Are Low-Hanging Fruit

At least half of those older than Millennials own a mobile device but don’t use mobile banking. While that may not be all that shocking, consider the untapped potential of mobile Millennials: 29% of Millennials own a smartphone but don’t use mobile banking. That where banks and credit unions should concentrate their marketing resources, says Ulankiewicz.

According to Raddon, if a Millennial owns a smartphone (which is pretty much all of them) but don’t use your mobile banking app, then in all likelihood you aren’t their primary financial institution.

“These younger consumers are your low hanging fruit,” notes Ulankiewcz. “Get these Millennials to use mobile banking and you can become their primary financial institution.”

Encouraging younger consumers to use mobile banking shouldn’t be that difficult either, even for community banks and credit unions without the resources and budget to invest in the cutting edge mobile banking technology. Why? Because the reality is that most mobile banking apps, tools and solutions in the banking industry are very similar in features and functionality (many financial institutions are buying the same white label solutions from a small pool of the same providers). There is often very little difference between apps offered by megabanks and the smallest credit union.

The difference is perception. Consumers incorrectly assume that big banks have a more robust mobile banking app because those institutions are better at tooting their tech horns. Smaller institutions still need a feature-rich and easy to use mobile app — that’s table stakes for any community bank or credit union, regardless of asset size. The key is to communicate to consumers the message that your mobile banking app is as good as any name-brand institution and then leverage your service, pricing and value to differentiate yourself from major banks.

Caution: Mobile banking users are significantly more likely to have relationships with multiple institutions. You must keep your mobile banking app competitive or risk defections.

Old Habits Die Hard

What about older consumers — Generation X and Baby Boomers? Shouldn’t you try to win them over to digital banking channels as well, since most own at least one mobile device?

The better question centers around how much to invest, explains Ulankiewcz.

“Moving Millennials to mobile banking is more about creating deeper relationships and hopefully becoming their primary financial institutional to drive more revenues,” Ulankiewcz says. “Older consumers are pretty entrenched in how they do their banking. Many like how they bank today and won’t be terribly eager to adopt mobile. For older consumers, mobile is more about reducing servicing costs. But even if you can get older consumers to transfer funds on their mobile device, you’ll save money.”

Ulankiewicz says banks and credit unions shouldn’t write off Gen X, Boomers and others who aren’t already using mobile banking services. They just need to be pragmatic realists. He recommends promoting basic mobile services to older consumers, but cap the investment and keep it relatively small.

“Most of these consumers are unlikely to move a large portion of banking activity to mobile,” Ulankiewicz concedes. “You want to get them to do basic banking on the mobile device without putting a ton of resources into it.”

Keep in mind, for some older consumers, screen size can be a limiting factor. And since these consumers are just as likely as Millennials own a tablet, educate these consumers on their tablets, which may be easier for them to use.

Caution: Be stingy when trying to drive adoption of mobile banking solutions among older consumers. Your energy and budget will be better invested in a younger audience; they are more receptive to mobile, and represent a greater lifetime value (LTV).

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Comments

Greg offers some important observations in this study, though I’d be careful with the article’s final caution about ‘older consumers.’ There are going to be geographic variations on the mobile behaviors of older consumers – e.g. urban areas will see higher rates of adoption/use than rural. Moreover, research from AARP shows that younger Baby Boomers (53-62 yo) use their mobile devices for banking at a much higher rate than the older members of their cohort. Pew Research also reminds us that mobile use among affluent seniors is growing rapidly. Bank/CU marketers need to look closely at the demographic/psychographic profile of their own customers/markets to determine the right mobile strategy.

Driving engagement in mobile is not just about a better UX or just more core banking features. It’s about making your mobile banking app more relevant to the consumers mobile daily experience. AFT power consulting’s recent survey on the most wanted mobile features ranked “coupons & loyalty” as the #1 and #2 features. These are not core banking features but expand relevancy to the user of your app. The majority of all demographics now use their mobile phone in-store looking for coupons and offers.